Be sure to include your name, daytime phone number, address, name and phone number of legal next-of-kin, method of payment, and the name of the funeral home/crematory to contact for verification of death.

Time to scale back our expectations

The region's top real estate pros warned us a couple of years ago that home values in the Northern San Joaquin Valley were overinflated.

Then gasoline, food and other expenses started climbing. Adjustable-rate loans began to reset to higher payments, and defaults took off. Credit got harder to come by. New homes flooded the market. Sales stagnated and prices sank. Consumers hit the wall.

One of those who identified in early 2005 that the market was headed for a fall, Mike Zagaris, president of PMZ Real Estate in Modesto, said the current slide shouldn't be a shock, given the market's previous peak.

"In our industry, you tend to pay to the extent to which you were rewarded," Zagaris said. "If you have a hot cycle at which you are increasing at double-digit rates, when the market turns, it tends to turn more dramatically."

When that happened, those who were running for cover were left with few options. They couldn't refinance because their houses were worth less than they owed on them, and there weren't enough buyers for all those who needed to sell.

For every person who took out a self-indulgent subprime loan to finance a lifestyle far beyond their means, there are others who got exotic financing to take care of family, pay down debts or get into homes in a market they feared being priced out of. Some weren't savvy enough to understand what they were getting into, some were victims of predatory practices, and some just didn't read the fine print.

Zagaris said people got caught up in the easy credit terms, which created a spend-now, pay-later attitude. "So the availability of money to, in effect, take what was a historically conservative investment asset and convert it into an ATM that can be used for current expenses, has undermined the basic security that investment has had in the past for many people."

Many borrowers believed the people they were dealing with had their best interests at heart. If that single-income family of four couldn't really afford that 3,000-square-foot house, one of those pro-

fessionals would warn them off.

But that's not really how it works. Business is business; it's not personal. People are in business to make money, and consumers have to look out for themselves.

Bob Endsley, founder of Coldwell Banker Endsley and Associates of Turlock, believes people were taken advantage of. "They were talked into low teaser rates and told they can't go wrong. If those loans had not been available, the demand for houses wouldn't have taken off like it did, and we probably wouldn't be in this mess."

So where do we go from here?

Clearly the market is in turmoil.

One of the things driving the downward spiral these days is people's attitudes. But don't blame the messenger, that's just an easy out -- the numbers are the numbers. Being better informed just makes for better consumers who make better choices. Everyone wants that, right?

"People need to make more prudent decisions," Endsley said.

And the best way to do that is to learn as much as you can about the marketplace, understand your own financial situation so you don't overextend and take your time making such a major decision.

Larry Matos, co-owner of Century 21 M&M and Associates of Modesto, said buyers need to find a home that meets, not exceeds, their needs and get a loan they can live with.

"I think for any buyer the thing they need to look at is, 'Can I sustain this loan for five years or 10 years?' " Matos said. " 'Is this sustainable?' And if it is, then I believe you're getting into the right product."

The key for sellers is, don't panic.

Just because sales are painfully slow doesn't mean a house that's priced right and spruced up won't find a buyer. In fact, it almost always comes down to price. Not the price your neighbor sold for at the top of the market in 2005, but the price that makes a house attractive today.

Don't be afraid to put some time and money into your home to make it more appealing. Price is key, but curb appeal and interior flair can set a house apart. So if the real estate agent says get rid of the clutter, just do it.

"If you list your home for sale today, it's entering a beauty contest, and there are many other homes entered in the beauty contest," Zagaris said. To do well in that contest, he said, a home needs to be in top condition, priced right and easily accessible for showings.

For those who can't lower the price enough to be competitive in today's market, finding a way to hang on is critical. The best approach is to be proactive. If you're having problems paying that mortgage each month, contact your lender. Not once, not twice, but daily if you have to, and see what accommodation can be worked out.

Banks and loan companies don't want to foreclose on houses. They make more if borrowers stay and pay, simple as that. Not all of them are willing to negotiate with borrowers who are in over their heads. But the pressure is rising to get them to offer some relief.

If all else fails, selling that sweet SUV, hot ski boat or radical motorcycle just might generate some needed revenue and reduce the debt load. There's also the option of taking on a second job, putting the kids to work to help pay bills or renting out a room -- whatever works.

But finding a way to hang onto that house is important. Why? Because it's your home and a good long-term investment. It's the single biggest asset most families will acquire.

With new home builders bailing or cutting back, that means the demand for existing housing will grow -- in time. And the real estate market will rebound.

Right now it's a buyer's market, Matos said. "There's an abundance of selection, prices continue to decline, sellers are willing to negotiate, and you can get a very favorable loan" because interest rates remain low.

How soon the market turns around is anybody's guess.

Zagaris and Matos already see signs that things are picking up, with bargain-

hunters and investors moving back into the market. Endsley thinks things will continue to cycle down for several more months before leveling off and could remain flat for a year or two.

Don't be surprised if the economy, and housing, takes a beating for a while. The credit problems and realty woes won't disappear quickly.

"I think the housing market has got another year of very weak sales, falling construction and lower home prices. And all of that assumes that the economy holds together reasonably well and we don't have a recession," Mark Zandi, chief economist at Moody's Economy.com., told The Associated Press last week.

Just remember, the house you bought pre-peak, peak or post-peak is still a home. Whatever you thought it was worth in 2005, it's still worth a lot today simply as your residence. Maybe not as much as you thought back then, but that wasn't real money anyway. But as the family home, it's priceless.

"We need to look at it as shelter ... not as an ATM or just as an investment," said Craig Lewis, president of Prudential California Realty in Modesto. "It is home, a place where people can raise their families, hold family gatherings. That is a mind-set we need to start readjusting."

Bee Business Editor David W. Hill can be reached at dhill@modbee.com or 578-2336.

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